Beware Ryanair-style fund fees – MoneyWeek

ButwhythehugeUK/USdifference?

“AlackofcompetitionintheBritishmarket,”saysJackBogle,founderofVanguard,theworld’sbiggestmutualfundmanager。

HenriServaesoftheLondonBusinessSchooladdsthat“thedisclosuresarenotasstrongastheyareinAmerica”。

Asforwheretheextrafeesarehidden,there’splentyofchoice。

Ryanair-stylepricingispopular,wherebytheheadlinerateexcludesextrassuchasthefundsplatformfee,advisoryfees,tradingcostsortheextracommission,orthefactyoudidn’tspotthattheinitialfeequoteonlyappliesifyouinvestoveraminimumamount。

TheBritishfund-managementindustryalsodoesn’thaveastandardisedreportingsystemacrossallproducts。

Somefirmspublishfundholdingseverysixmonths,whereasintheUSallfirmspublisheveryquarter。

Theimpact?

SCMPrivatereckonsBritishinvestorsarestungforanextra£2。

7bnbyUKmutualfundsthanisapparentfromthepublishedtotalexpenseratio(TER)。

Worse,“inwhatisallegedlyacompetitiveindustry,theBritishfundsmarket,howisitthattheaveragecostoffundshasrisenovertheyearsratherthanfallen”?

asksPeterSmith,headofinvestmentspolicyattheFSAonWhatinvestment。

com。

“That’ssomethingwearegoingtobethinkingabout。



Whilehe’sthinking,investorsshouldwatchout。

Askforabreakdownofproductfeesbeforebuyingandifit’snotclearhowmuchyouarepaying,orwhy,stepaway。

It’shighlyunlikelymostfundmanagerswillmakeupinperformancewhatyouarelosinginexcessivecosts。

Ifindoubt,optforcheaperinvestmenttrustsandexchange-tradedfundsoverunittrustsandOeics。

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